Decentral Block Post

The Ether price has held above $1,820 for the past three weeks, despite facing a 13.7% correction between April 18-21. Still, analyzing a broader time frame provides a more constructive view, as Ether (ETH) has gained 20.8% in three months while the S&P 500 stock market index has stood flat. However, according to ETH options and futures metrics, the gains have not been enough to make professional investors bullish.

Worsening macroeconomic conditions have driven cryptocurrencies’ positive momentum in 2023, including the ongoing banking crisis. According to Arthur Hayes, former CEO of crypto derivatives exchange BitMEX, if the government refuses to bail out First Republic Bank, it could set off a dangerous chain reaction of insolvencies.

Recession risks increased after the United States economy grew at a modest 1.1% annualized pace in the first quarter, well below the 2% expected. Meanwhile, inflation continues to hurt the economy, as the personal consumption expenditures price index rose 4.2% in the first quarter.

Driving the bearishness from whales and market makers is the diminishing total value locked (TVL) and average transaction fees above $4 since February on the Ethereum network. According to DefiLlama data, Ethereum decentralized applications reached 15.3 million ETH in TVL on April 24. That compares with 22.0 million ETH six months prior, a 30% decline.

Ether’s inability to break above $2,000 could also reflect traders anticipating the Federal Reserve raising interest rates again on May 3. Higher interest rates make fixed-income investments more attractive, while businesses and families face additional costs to refinance their debts, creating a bearish environment for risk assets, including ETH.

Bitcoin (BTC) stuck to $29,000 at the April 27 Wall Street open as United States GDP growth missed expectations.

U.S. GDP figures reveal surprise slowdown

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD once again stagnant after flash volatility the day prior.

The largest cryptocurrency had liquidated over $300 million in long and short positions after a snap correction over claims that Mt. Gox and U.S. government bitcoins had left their wallets.

A subsequent rebound rescued some of the losses, but $30,000 remained out of reach as macro data failed to offer a suitable catalyst.

This came in the form of GDP growth, which at 1.1% fell far short of predictions.

Bitcoin (BTC) bulls might be disappointed after the $31,000 resistance proved stronger than expected on April 14. However, looking at a broader time frame, Bitcoin has been the best-performing asset in 2023, gaining over 74% year-to-date at $29,000.

Positioning for weaker dollar, debt ceiling

It is worth noting that gold is merely 4% behind its all-time high, likely indicating a weaker U.S. dollar as investors increase the odds of recession and further fiscal turmoil for the world’s biggest economy.

Behind the bullish price momentum for Bitcoin are the weakness in the U.S. financial system, namely the $100 billion in quarterly net withdrawals at First Republic Bank and the legislative effort to approve an increase to the urgent $31.6 billion national debt ceiling.

For Bitcoin investors, a financial crisis is a net positive as it forces the U.S. Federal Reserve to expand its emergency funding programs and take out additional unprofitable long-term debt from the system.

Cryptocurrency traders are uncomfortable with the regulatory environment, and the April 25 statement from the New York Federal Reserve further added to the uncertainty. The guidelines disclosed could potentially hinder the USD Coin (USDC) stablecoin issuer Circle’s access to the Fed’s securities reverse-repurchase program, the safest vehicle to get yield on deposits.